a1apbc
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I follow commodities so I would add in that if you feel commodities will continue to rally, you may consider commodities currencies. The Canadian dollar, a.k.a. Loonie or CAD, is heavily linked to oil, since Canada sits on the second largest oil reserve in the world, next to Saudi Arabia. The Australian dollar, a.k.a. Aussie or AUD, is heavily linked to gold, since Australia is a heavy exporter of gold-similar to the New Zealand dollar, a.k.a. Kiwi or NZD.
From an interest rate standpoint, if you feel that carry-traders will continue to unwind then you should go for the Yen, or JPY. Now, since many countries, like Australia or even the US, have significantly higher interest rates than Japan, investors tend to borrow Yen in Japan in order to invest in other countries. This is effectively shorting the Yen, driving the price down. Now, when there is some sort of shock, such as the sub-prime concern, or a central bank rate decrease in the US, Europe, Great Britian or the like, the natural reaction is that a certain percentage of these carry traders repay their Yen loans, driving the price of that currency up.
Be sure to differentiate currencies such as the Euro, US Dollar, Japanese Yen, Great Britain Pound, and other G-8 countries from countries like Iraq, Vietnam, or even China. Developing countries carry a higher risk premium-so yes there is a higher potential of big increases, but volatility swings (ups and downs) can wipe an investor out before that day ever comes. So it really boils down to your risk tolerance and time preference. Since foreign exchange is zero-sum, an appreciation of one is essentially a depreciation of others, so it doesn't necessarily have a natural tendency to appreciate over time like stocks or real estate, for instance.
In the 1950s, one dollar would buy approximately 700 yen-in 1995 it would have only bought less than 80! (Now it will buy about 115.) |
HeavyD
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Chinese Yuan / renminbi, Indian rupee, Indonesian rupiah, British pound, Canadian dollar...just about everything BUT the USD, unfortunately. HeavyD |
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